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A lattice-based model to evaluate variable annuities with guaranteed minimum withdrawal benefits under a regime-switching model

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  • M. Costabile

Abstract

We consider the problem of evaluating variable annuities with a guaranteed minimum withdrawal benefit under a regime-switching model. We propose a trinomial lattice model to approximate the evolution of the investment fund value and the policy value at inception is computed through a backward induction scheme. Finally, the insurance fee is computed as the solution of the equation that makes the contract actuarially fair. Numerical results are reported to illustrate the consistency of the proposed model.

Suggested Citation

  • M. Costabile, 2017. "A lattice-based model to evaluate variable annuities with guaranteed minimum withdrawal benefits under a regime-switching model," Scandinavian Actuarial Journal, Taylor & Francis Journals, vol. 2017(3), pages 231-244, March.
    • Handle: RePEc:taf:sactxx:v:2017:y:2017:i:3:p:231-244
    DOI: 10.1080/03461238.2015.1119716
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    Cited by:

    1. Ludovic Gouden`ege & Andrea Molent & Xiao Wei & Antonino Zanette, 2024. "Enhancing Valuation of Variable Annuities in L\'evy Models with Stochastic Interest Rate," Papers 2404.07658, arXiv.org.
    2. Fontana, Claudio & Rotondi, Francesco, 2023. "Valuation of general GMWB annuities in a low interest rate environment," Insurance: Mathematics and Economics, Elsevier, vol. 112(C), pages 142-167.

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